The Friedmans and Joseph Schumpeter on Economic Progress
By David Henderson
My review of Alex Epstein’s The Moral Case for Fossil Fuels has been accepted by Regulation magazine and will be published in the Summer issue. In my review I quote Epstein quoting a passage from Milton and Rose Friedman’s Free to Choose. They make a very good point. But the further I get away from the quote, the more I think they overstate the case.
Here’s the quote from Free to Choose:
Industrial progress, mechanical improvement, all of the great wonders of the modern era have meant little to the wealthy. The rich in ancient Greece would have benefited hardly at all from modern plumbing–running servants replaced running water.
The idea that running servants replaced running water is accurate. Also, it’s certainly the case that, percentage wise in dollar terms, the gain [the increase in consumer surplus] to the poor and middle class from such conveniences was greater than the gain to the wealthiest.
It’s the “hardly at all” that bothers me. Now that the rich had modern plumbing, they could redeploy their servants (slaves?) to other tasks. Those tasks would, of course, be less important than carrying water was when there was no modern plumbing, but the tasks could have been important nevertheless. It’s a “think on the margin” thing.
I prefer the late Joseph Schumpter’s way of making the same point in his book Capitalism, Socialism, and Democracy, Schumpeter wrote:
Queen Elizabeth [the first] owned silk stockings. The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort.
Note the nuance. The word “typically” allows Schumpeter to keep the idea that, indeed, QE1 or other queens would have gained from the fall in price (due to increased supply) of silk stockings. But the typical gainer was a “factory girl.”